NIRANKARI SONS JEWELLERS PRIVATE LIMITED,DELHI V. INCOME TAX OFFICER, WARD 18(3), DELHI, DELHI

ITA 2818/DEL/2024

AI Insights

The case revolves around the appeal by Nirankari Sons Jewellers Pvt. Ltd. against the order of the National Faceless Appeal Centre (NFAC), which confirmed the addition of unexplained cash credits amounting to Rs. 1,33,09,590 and Rs. 71,87,098 for the assessment year 2017-18. The Income Tax Officer (ITO) had initially added these amounts as unexplained cash credits under Section 68 of the Income Tax Act, 1961, citing manipulation of sales figures. The assessee contended that the increase in cash sales was due to the festive season, supported by various documents including audited books of accounts, VAT returns, and stock tallies. The Tribunal, after examining the evidence and the arguments presented, concluded that the additions were unjustified as the sales were legitimate and properly recorded.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47038 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: AJAY WADHWA
• Keywords: Unexplained cash credit; Income from undisclosed sources
• Section: 143(3); 68; 44AB

Judgement Text

"1 ITA no. 2818/Del/2024 Nirankari Sons Jewellers Pvt. Ltd. THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER AND SH. NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA Nos.2818/D/2024 (Assessment Years: 2017-18) Nirankari Sons Jewellers Private Limited, 39 Edward Lane, Kingsway Camp, Delhi Vs. ITO Ward- 18(3) Delhi \u0001थायीलेखासं/जीआइआरसं/PAN/GIR No: PAN No. AADCN5299C Appellant .. Respondent Appellant by : Sh. Ajay Wadhwa, Advocate Sh. Shivam Garg, Advocate Respondent by : Sh. Amit Katoch, Sr.DR Date of Hearing 03.03.2025 Date of Pronouncement 09.04.2025 ORDER PER MADHUMITA ROY, JM The instant appeal filed by the assessee is directed against the order dated 09.05.2024 issued by the National Faceless Appeal Centre, (referred as “NFAC”) arising out of the order dated 30.12.2019 passed by the Income Tax Officer, Ward- 18(3), New Delhi under Section 143(3) of the Income Tax Act, 1961 3 ITA no. 2818/Del/2024 Nirankari Sons Jewellers Pvt. Ltd. out of the cash sales during 01.11.2016 to 08.11.2016 as unexplained cash credit under Section 68 of the Act was made which was further confirmed by the Ld. CIT(A) and thus, impugned before us. 5. So far as the huge cash deposit is concerned it is the case of the assessee that there was a rise in sale of gold / diamond ornaments during the month of October, 2016 on account of festive season of Diwali, Dhanteras, Bhaiya Duj and Karwa Chauth etc. Such increase in sale of gold/ diamond jewellery was duly backed by the reports published in various newspapers, one of which was also furnished before the lower authorities. 6. However, taking into consideration of two times of the average sales of earlier three months i.e. July, August and September, 2016, the Ld. Assessing Officer came to a finding that the assessee manipulated sale figures and introduced its unaccounted income in the garb of cash sales. The difference between the cash sales shown in the month of October, 2016 i.e. Rs. 2,09,74,074/- and two times of the above average sale of earlier 3 months i.e. Rs. 38,32,242/- as mentioned above ultimately Rs.1,33,09,590/- of cash sale resulting in cash deposit has been added in the hands of the assessee as unexplained cash credits by the Ld. Assessing Officer under Section 68 of the Act was, in turn confirmed by the Ld. CIT(A) . 7. So far as the cash sales made during the period from 1.11.2016 to 08.11.2016 to the tune of Rs.71,87,098/- is concerned, the assessee explained that with the announcement of 5 ITA no. 2818/Del/2024 Nirankari Sons Jewellers Pvt. Ltd. 9. It is the case of the assessee that cash sales supported by audited books of accounts, invoices suffered from VAT, VAT returns, stock tally cannot be disregarded, particularly, when no discrepancy was found in the stock register, purchase and sales. The purchases, sales and stock are interlinked and inseparable; every purchase increases the stock and every sale decreases the stock. Keeping in view this particular aspect of the matter, the Ld. Counsel further argued that to disbelieve the sales, the Revenue must prove that the assessee should not have sufficient stocks in his possession or that there must be defects in the stock register. Once there no defect is identified and the purchases and sales are matching with inflow and outflow of stock, there is no reason to disbelieve the sales made by the assessee and addition made thereon is, thus, wrong and not sustainable in the eyes of law. 10. No discrepancy either found in the qualitative tally in the stock register maintained by the assessee neither the opening stock purchases and closing stock has been doubted by the department as also contended by the Ld. AR. The Authorities below has not taken into consideration this particular aspect of the matter that the cash sales made by the assessee had been credited in the books of accounts and reduction in the stock has not been doubted; neither excess nor shortage was found in the stock register. The sales were made by the Assessee out of the opening stock and purchases and the resultant closing stock has been accepted; the sales had not been disturbed either by the Ld. AO or by GST/VAT department. Particularly when the financial statements clearly show the reduction of stock position and the 7 ITA no. 2818/Del/2024 Nirankari Sons Jewellers Pvt. Ltd. vii. Detail of purchases amounting to Rs. 4.2 crores with R.N. Bullion Pvt. Ltd. along with date, invoice no., item description, weight and amount with VAT at page 277 of the PBK1. viii. Copy of Purchase invoices amounting to Rs. 4.2 crores with R.N. Bullion Pvt. Ltd. at page 87-107 of the PBK1. ix. Detail of labour charges from 01.04.2016 to 31.03.2017 at page 279-282 of the PBK. x. Month wise detail of sale & purchases for FY 2016-17, FY 2017-18 & FY 2018-19 at page 269 of PBK1. xi. Sale Register with date, mode of payment, name & address of buyer, voucher number, narration, quantity sale amount, labour Charges, VAT & Total Amount at page 54-77 of the PBK1. xii. Detail of sales showing mode of payment, name and address of buyer, voucher number, narrations, quantity, gross total, sale, labour charges, VAT at page 283-288 of PBK1. xiii. Detail of sale showing mode & bank etc. in which sales is reflected along with date, invoice number, total sale amount at page 342-357of PBK1. xiv. Month wise details of cash deposit and cash sale along with opening cash in hand, cash sales, cash deposit, cash withdrawn and closing cash in hand from 01.04.2015 to 08.11.2015 at page 272 and from 01.04.2016 to 08.11.2016 at page 273 of PBKI. xv. Month wise detail of cash sale and cash deposited in Punjab National Bank, HDFC Bank & ICICI Bank-page 358 of PBKI. xvi. Details of cash sale for FY 2015-16 and FY 2016-17; cash sales from 01.04.2015 to 08.11.2015 and from 01.04.2016 to 08.11.2016 page 271 of PBКІ. 9 ITA no. 2818/Del/2024 Nirankari Sons Jewellers Pvt. Ltd. e. Bank book of HDFC Bank, ICICI Bank and Punjab National Bank are made available at pages 158-182 of the PBK1. f. The Cash book is also annexed at pages 183-265 of the PBK1. g. Banks statement of HDFC bank & PNB bank are annexed at pages 308-341of the PBK1. 17. Most importantly the Sale invoices containing invoice No., date, party name, party address, contact of purchasers, description of good such as quantity, rate, amount, labor, hallmarking charges, VAT and mode of receipt of payment in respect of sales made from 01.11.2016 to 08.11.2016 are appearing at pages 366- 425 of the PBK2. 18. It is relevant to mention that the Ld. DR has not been able to raise any objection in regard to the above details annexed to the paper book filed by the assessee which was duly submitted before the First Appellate Authority and duly confronted to the Ld.AO during remand proceedings. These documents clearly establishes that the cash deposit was made out of cash sales duly recorded in the books of account which was further audited under Section 44AB of the Act. In that view of the matter without referring any defect in the evidences so produced by the assessee in support of claim, the sales cannot be disregarded as contended by the Ld. AR is found to be acceptable. We have considered the fact that such cash deposit made out of cash sales duly accepted by the VAT/GST department; there was no revision in those returns neither any difference or defect was pointed out in these references which further establishes the fact of stock available with the assessee in 11 ITA no. 2818/Del/2024 Nirankari Sons Jewellers Pvt. Ltd. revenue, particularly when sales and purchases register, invoices, Stock Register were though furnished, the AO failed to make any further enquiry on this. Moreso, only cash credit was considered under Section 68 of the Act and not the trading receipts. 19. Sales were offered as revenue receipt and the same has been admitted as income and therefore, addition on the same amount as un-explained cash credit under Section 68 of the Act tantamount to double taxation, as argued by the learned AR, is also found to be acceptable. There is no statutory bar in making cash sales in A.Y. 2017-18. Section 269 ST bars receiving money in cash over and above of Rs. 2 lacs against sale was introduced only in F.Y. 2017-18 w.e.f. 01.04.2017 i.e. A.Y. 2018-19. Neither there is any legal bar in keeping its money in the Bank Account. Then, considering the entire aspect of the matter, we find that the assessee has discharged the initial burden cast upon him to prove the credit entries in the books of accounts and thus, the burden shifted to Revenue to conclusively prove that the credit entries appearing in the books of accounts are unexplained in terms of the provision of Section 68 of the Act which is completely absence in the case in hand. We note that the sale are backed by documentary evidences cannot be rejected arbitrarily; the above disallowance is, thus, also found to be without any basis. Upholding the addition made by the Ld. AO by the Ld. CIT(A) merely on the premises that the purchasers did not respond to the notices issued by the Ld. AO or that the assessee failed to produce confirmations from the purchasers only because letters were issued by the AO (though without mentioning any section of "